Can the EU become a leader of green technologies?

Yes, it is possible, but the EU needs to make rational economic choices when it comes to the development of new technologies while boldly taking on board flagship projects in areas such as clean coal and especially CCS.

This task won’t be easy. From one side we can see a huge engagement of the business sector. For example SAP - world-scale provider of business software - announced a long-term strategic focus on sustainability. To demonstrate its own commitment to sustainable operations, the company has set a target of a 51% reduction in total greenhouse gas emissions from its 2007 baseline levels by 2020. Others - Alcatel, Dell, Ericson, Intel, Microsoft - to name only few, decided to make their own commitments aimed at CO2 emissions reduction. From the other side, we have to be aware of the fact that in addition to decisions about strategic investments, the industry needs to know what kind of a global legal-political framework is to be adopted. This would allow industry to develop a long-term low-carbon policies and foster long-term investments. Unfortunately, credibility of this framework is in many cases (not only, but especially in low-income and developing countries) lacking.

What is more, it is not only Europe that sees advantages of becoming a leader in green technologies. As Joseph Stiglitz and Nicolas Stern argue, "US leadership could generate a powerful response from across the world, making possible an agreement at the United Nations climate change conference in Copenhagen in December on a scale necessary to manage the risks involved". But, at the same time, the more the US invests in green technologies, the more the EU will feel the breath of competition on its shoulders. Another scenario would be that the EU and the US join its forces and establish global programmes that will serve both CO2 emissions’ reduction and economic growth - there is a huge potential for this kind of solution in Clean Coal Technologies, where they will be supported by other players, such as Australia, Canada, Latin America, Norway, South Africa. This group might in the years to come be able to advance remarkeably on low-carbon solutions for and with big emitters, whose economies are highly dependent on coal - China or India.

A huge potential of the developing world

Europe - being the biggest development-aid donor in the world - could become a provider of solutions for developing countries. Here it should also specialise in selected sectors and pay attention to the most challenging geographic regions. When it comes to selecting the sectors, we should think about something that the EU is already good at or where it is ahead of other ’big players’. Therefore, with no doubt the sectors could be: (1) Carbon Capture and Storage (CCS) and (2) Information and Communication Technologies (ICT), and regions: (1) China and (2) Africa.

Solution one - Carbon Capture and Storage

CCS is becoming one of EU’s flagship projects. The European Union has decided to build up to 12 demonstration plants in a period to 2015, but it is not the only one who is interested in developing this technology. The global race has begun. The one, who will be the first to build a large-scale power plant with CCS, will also be the first to come into possession of a title of the global leader in its field and will also be the first one ready to export this technology. And the game is worth the candle. According to the International Energy Outlook, China, with its large domestic base of coal resources and continuing strong economic growth, alone accounts for 71% of the increase in world coal consumption. This means that, to meet its international obligations connected to counteracting climate change, China will need to stake on clean coal and, what is more important, will need to gain the technology from somewhere. It would be wise for Europe to be prepared when this moment comes.

One by one private energy and engineering companies (including Shell, StatoilHydro, Alston, GE, Vattenfall) give their backing to CCS, although business community will in many cases hesitate to act without visible engagement of those EU Member States, which are going to host CCS demonstration projects. Therefore, one possibility would be to assign at least 20% of the national stimulus plans for low-emission growth. The EU should think about the creation of a new instrument in its budget (in the next financial perspective 2014 - 2020) - for instance the instrument for "strategic low-emission infrastructure", which would include investments in CCS technology. In the meantime, it would be desirable to use EU Structural Funds. When we take into consideration concrete examples - the CCS installation in Belchatow (one of the two being planned in Poland) is estimated to cost 500 million euro, Poland was promised to get 180 million euro from the EU recovery plan, which means it will have to raise another 320 million euro. These amounts could be collected from: (a) EU Operational Programme "Infrastructure and Environment", (b) Poland’s national budget, (c) private sector or (d) relevant companies’ own resources and the decision on financial instruments has to be made quickly.

Therefore, there are clearly means in Europe to achieve our common goals, but to make it possible all Member States need to have a very high level of determination - find a proper way to finance its demonstration plants, establish proper regulatory framework and then be ready to share its experience with those, who are perhaps currently a part of the problem, but can become a part of the solution.

Solution two - Information and Communication Technologies

The Climate Group in its report "Smart 2020: Enabling the low carbon economy in the information age" argues that ICT can improve the energy efficiency of logistics operations, building sector, power transmission and distribution, communication and many others. These include software to improve the design of transport networks, allow the running of centralised distribution networks and moving to the most efficient type of transport, eco-driving and route optimisation. ICT-based monitoring of energy consumption in buildings, feedback and optimisation tools can be used to reduce energy consumption. These also include new ways of communication - meaning replacing face-to-face meetings with videoconferencing, or paper with e-billing. This means that ICT has a very significant role to play in reducing greenhouse gas emissions, especially in developing countries (including of course China, India, Brazil etc., but also - if not in the first place - Africa), which will not only need to improve existing infrastructures - as the developed part of the globe, but, what is more important, create stable basis for its growth. And the demand for roads, buildings, mobility, access to knowledge, telecommunication will grow rapidly.

To give an example, Ernst&Young in its report "Africa connected. A telecommunications growth story" estimates that "during the period from 2002, the French telecommunications market grew at a compound annual growth rate of 7,5% and the Brazilian market at 28% while the African market experienced 49,3% growth" and even with the current economic downturn, it is expected that telecommunications in Africa will continue to develop faster then any other region over the next three to five years. What is more, telecommunications providers already functioning in the more mature African markets are starting to reposition themselves to address the broad spectrum ICT. This is where Europe can find its niche.

Looking for financial support of green initiatives in developing countries, European Investment Bank suggested innovative financial sources, such as special (additional) taxes for international lotteries or air-tickets, but it seems that the problem doesn’t lie in money, but in their distribution. This was also emphasised in the Presidency Conclusions from 19-20 March 2009, where the European Council underlines that we should make full use of "official sources of financing, such as export credits and investment guarantees as well as development-oriented support in the areas of research and technology, peace and security, migration and climate change" and "enhance the effectiveness and coordination of instruments and resources". Following these recommendations, the EU and its Member States should review their development aid policies in a way to be able to keep their word and allocate more financial support to information and telecommunication technologies.

Existing tendencies in the world show that ’green’ technologies and future-oriented policy can not only help the UE recover from economic crisis, but also (in a broader perspective) earn the EU a credit for the future by strengthening its international position as a leader in innovation and global provider of solutions for reduction of greenhouse gas emissions. But before the EU reaches this point, it will need to precisely define its goal and gain clarity on the extent of reductions of emissions it considers necessary and achievable. It should also have a better view on what it means exactly by low-carbon economy. The EU should also connect its green policy with other processes currently taking place. Low-carbon economy should be one of principal priorities within the framework of new Lisbon Strategy, it should be one of new thematic strategies. When planning new Financial Perspective (2014 - 2020), the Union should carry out deep holistic and sectorial analysis - an impact assessment on introduction of green mechanisms in different sectors of the economy in the context of the costs associated with them.

* Agata Hinc, Analyst, Energy and Climate Programme, demosEUROPA - Centre for European Strategy

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